Articles​

After the end of the Korean war, North Korea was a virtually cashless society - everyone worked for the state and was provided for by the state. And in the Communist bloc context of the day, it worked - in 1989 North Koreans were more than twice as wealthy as their comrades in China.

​„Now we think of them as a hermit kingdom and not trading very much.“ says William Brown.

​„But actually they were integrated reasonably well into the Soviet plan system of countries.” says William Brown.

The loss of support from the Soviet Union, after its collapse in 1991, and a series of droughts and floods lead to a great famine in North Korea.

​„The famine ended the public distribution system where the North Korean state fed everyone through the ration system the government couldn't supply food so people launched off on their own.” says William Brown.

Since then, a strange hybrid economy has emerged, part government-controlled - where rations are allocated by the state - and part grey market, where currency is earned in the market economy. For example: A typical textile worker in the state-run Pyongyang textile mill earns around 3,000 won per month - which has a street value of about 40 cents. But that worker pays nothing for housing or utilities and receives food rations. Her sister might legally work for an export oriented company. She's allowed to get 30,000 won per month but with fewer perks. Another sister could work for a Chinese company and earn 300,000 won per month but with zero perks from the government.

​„All the state workers get paid through this incredibly low wage system and are dependent on rations that often don't show up. The ideal situation is for one person in the family to work for the state system and one person earning real money.” says William Brown

​It is a highly inefficient system. In per capita income terms, North Koreans are now 8 times poorer than Chinese and over 20 times as poor as South Koreans. Rather than reform, the government sought to fill a shortfall in hard currency by trafficking illegal goods abroad. According to numerous reports, this illegal business is run by an agency known as Office 39.

​„It's an office that's organized principally to raise US dollars for the ruling Kim party family.” says also William Brown

A study from a Washington-based human rights group trace's the regime's criminal ventures back to the 1970s when about a dozen North Korean diplomats were expelled from Scandinavian countries for smuggling alcohol, cigarettes, and hashish. Later the government switched to foreign organized crime syndicates to sell things like counterfeit pharmaceuticals and heroin, manufactured from state-mandated poppy farms. North Korea's government has dismissed such claims and some analysts have also questioned the data. Since 2005, intercepts of North Korean smuggling have fallen sharply though more recently claims of cyber theft have proliferated. Meanwhile Kim Jong-Un has started speaking to South Korea about opening up for investment in restricted economic zones and he's talked about switching to a more China-like socialist economic construction. Whether that's a true change of heart, or just a tactical retreat in the face of sanctions remains to be seen.​